Palestinian Authority: Support

Baroness Amos: My right honourable friend the Secretary of State for International Development has made the following statement.
	I am today announcing a £7 million initial UK contribution to the World Bank's Public Financial Management Reform Trust Fund to support the Palestinian Authority.
	The Palestinian Authority has been in fiscal crisis since late 2000. Lack of revenues due to economic collapse prevents it delivering services effectively to the Palestinian people. In 2004 its total budget is 1.45 billion dollars. Revenues are expected to be 800 million dollars, leaving a financing gap of about 650 million dollars. Donor budget support in 2003 was 270 million dollars, a sharp fall from 2001 and 2002. The PA has large and growing debts to the private sector and commercial banks. This is an unsustainable situation, and a continued fiscal crisis could lead to the termination of social and administrative services to the population, and poverty (already at over 60 per cent) increasing further.
	At a meeting of the Ad Hoc Liaison Committee in December 2003, attended by the Palestinian Authority (PA), Israel, major donors to the PA and other Arab countries, the PA asked the World Bank to create a new mechanism through which donors could provide pooled contributions to support the PA's budget. The Public Financial Management Reform Trust Fund was approved by the World Bank's board on 22 April and launched on 27 April. The objectives of the Reform Fund are to mobilise additional donor resources in support of the PA budget, to harmonise donor assistance in exchange for a commonly agreed reform programme, and to simplify procedures for the PA. Use of direct budget support also reflects World Bank analysis that this is the most efficient of all the emergency assistance instruments currently employed by donors, with substantial macroeconomic and welfare benefits.
	An important precondition for creation of the Reform Fund was a satisfactory assessment of the current financial management procedures of the PA. The World Bank has carried out a detailed Country Financial Accountability Assessment (CFAA), which found that major and highly creditable improvements in budgeting and fiscal transparency have been introduced during the tenure of the present Palestinian Finance Minister. Weaknesses in financial accountability remain, related in particular to the lack of adequate public financial statements, inadequate auditing and the undeveloped oversight role of the Palestinian Legislative Council. But the CFAA confirms that the current systems are adequate to justify World Bank budget support. It also identifies key actions needed to further improve the systems, and these have now been agreed with the PA as performance benchmarks for the Reform Fund. Disbursement of funding will be conditional on achievement of reform benchmarks. This is an approach successfully used by the EC in its recent bilateral provision of budget support to the PA.
	The use of donor funds provided to the PA through the Reform Fund will be carefully monitored. Prior conditions for the first disbursement, such as passage of a 2004 Budget Law, and the payment of all security personnel salaries by direct bank transfer, have already been met. Funding will be disbursed in six-month tranches depending on progress with further reforms, such as revised external audit arrangements, containment of the wage bill, maintaining a minimum level of social sector expenditure, and full control of the Ministry of Finance over all PA procurement. World Bank staff will monitor the implementation of the benchmarked actions on a regular basis. Every quarter, the PA will prepare a progress report. Using these reports, the bank will lead quarterly technical and fiduciary supervision missions to review compliance with agreed prior actions and benchmarks, budget implementation and general economic and social developments. DfID will participate in these missions.
	In the event of the PA not meeting all benchmarks, the World Bank would assess the specific situation and consult contributing donors on whether a waiver were appropriate. Should no waiver be granted, the release of the next tranche of funding would be held back pending fulfilment of the benchmarks. The World Bank could also, in consultation with contributing donors, suspend disbursements if the PA reversed already implemented policy actions, until remedial action were taken. Donors have the option of bilaterally withdrawing their money from the Reform Fund at any time.
	In addition to the PA's own external auditing arrangements, an external auditor contracted by the World Bank will perform annual audits of the Reform Fund's deposit account at the PA Ministry of Finance. These audits will verify the extent to which the World Bank's requirements under the grant agreement are being met, and whether the PA's procedures are adequate to achieve this result.
	We expect several donors to contribute to the Reform Fund. Norway and Canada have already decided to do so. Other countries are considering contributions. The World Bank plans to contribute 20 million dollars of its own alongside the fund. The EC has been providing budget support to the PA since 2000, and is likely to continue doing so. The IMF is involved in a technical capacity. The USA has been actively involved in the design of the fund, and will participate in its management. The G8 has urged the international community to increase and accelerate their assistance provided to the PA. We and other contributors will be urging other donors to give money to the Reform Fund. Arab states continue to be the biggest supporters of the PA's budget, although some may prefer to contribute outside the Reform Fund.
	DfID has thoroughly appraised a UK contribution to the Reform Fund, in line with our published policy on the provision of direct budget support. This policy reflects our commitments under government acounting that aid should be properly accounted for, used for the intended purposes and represent value for money. When appraising budget support, we ensure the following: first, that a thorough evaluation of public financial management and accountability systems, and associated risks, has been carried out; secondly, that the recipient government have a credible programme to improve standards of these systems; thirdly, that the potential developmental benefits justify the risk, taking account of any safeguards that can be put in place to buttress and develop these systems; and fourthly, that these assessments are explicitly recorded as part of the decisionmaking process to provide assistance. In the case of the Palestinian Authority, we share the World Bank's assessment that there is a significant fiduciary risk, but that a satisfactory programme of reforms is in place to reduce this risk. This level of risk is not unusual in countries where DfID provides budget support. I have judged that the developmental benefits of providing budget support, and the risks of not providing it, justify this fiduciary risk.
	In making this judgment I have also looked at the impact on poverty of PA spending. The PA does not have an internationally recognised poverty reduction strategy. But it has started to develop short-term planning frameworks to guide its own prioritisation. I share the judgment made by the International Development Committee in its report in February that, although unusual, given the current state of the Palestinian economy, "wage payment maintained by budget support is an effective method of emergency poverty alleviation". The PA Ministry of Planning is beginning to develop a more comprehensive approach to poverty reduction. DfID will work with other donors to help them do this, alongside the provision of budget support.
	I have of course considered the many allegations made against the PA about diversion of funds. In particular, there have been accusations that budget support previously provided by the European Commission was used to finance terrorist activities. An EU independent anti-fraud investigation into these allegations has been going on for over a year and has not yet concluded. An inquiry by a European Parliament Working Group on Budgetary Assistance to the Palestinian Authority reported in March 2004, after a one-year investigation. The majority report concluded that, "there is no conclusive evidence, to date, that the EU non-targeted Direct Budgetary support was used to finance illegal activities, including the financing of terrorism", and that, "there is no evidence that EU budget support has not been fully transferred into the PA budget or that it was used outside the budget". It further concluded that budget support had, "contributed to bring about concrete changes in the PA financial system and impacted on the PA reform process towards more transparency, accountability and good governance". Recommendations from the report have largely been addressed in the design of the World Bank Reform Fund, notably that, "future budget support should be accompanied by clear, specific conditionalities subject to strict monitoring" and that "such conditionalities should be established in full co-operation and in close co-ordination with the other international donors".
	It has been suggested that aid to the PA should be conditional on progress with security sector reform, and other measures to reduce terrorism against Israeli citizens, such as action against incitement. We agree with the World Bank and other donors that at this stage it will be more effective to link disbursement of budget support to conditions related to financial management, budget allocation and accountability. The Government have made action on Palestinian security their highest diplomatic priority in our relations with the PA. We are also providing practical assistance to help them to take this action. Particularly under current circumstances, we do not think an underfunded PA which risks not being able to pay salaries is in the interests of Israeli security. We have informed the Government of Israel of our decision to contribute. The Israeli Government have told us that they welcome international humanitarian and economic assistance to the Palestinians and support the World Bank Reform Fund, provided the money is properly spent and monitored.
	Contributing to the PA's budget is in line with the Government's strategy for supporting Palestinians. Our new Palestinian Country Assistance Plan says we will work with partners to help to end conflict and create a viable Palestinian state that will reduce poverty. The strategy has three aims: prospects for peace enhanced; more effective, accountable and inclusive Palestinian institutions and governance systems; and humanitarian and development assistance delivered more effectively. Contributing to the Reform Fund will address all three outcomes. It will also address the Government's wider political objectives on the Middle East peace process, by helping the PA to meet its roadmap commitments. Our initial contribution to the Reform Fund is for 2004. We will consider later this year, in light of monitoring of the PA's use of donor funds and its likely financing gap and spending plans for 2005, whether we should continue contributing.
	I am placing in the Library of the House the World Bank's board paper describing the rationale for, and operational arrangements of, the Reform Fund, which includes as an annex the Palestinian Authority's Statement of Development Policy and a matrix of further reform actions the PA is undertaking. I am also placing in the Library of the House copies of the finalised Palestinian Country Assistance Plan.

Draft Criminal Defence Service Bill

Lord Falconer of Thoroton: I am pleased to announce the publication today of a draft Criminal Defence Service Bill together with a consultation paper seeking views on a number of possible models for the delivery of a restructured criminal legal aid scheme. Copies have been placed in the Libraries of both Houses.
	It has been the shared belief of this Government and previous administrations that those found guilty of offences who can afford to pay their defence costs should be required to do so. This is right in principle and will ensure and that a greater amount of finite legal aid funds can be targeted at the poor, the vulnerable and the victimised in line with the commitments set out in the DCA manifesto by the Secretary of State for Constitutional Affairs.
	The Draft Bill contains two key proposals: the reintroduction of a financial eligibility (means) test; and the transfer of the authority to grant the right to publicly funded representation away from the courts and into the scope of the Legal Services Commission.
	My department believes that, taken together, these two measures will bring a greater level of consistency and better control over grant as well as ensuring that those found guilty of offences pay where they are able to do so.
	The accompanying consultation paper discusses in more detail, and invites comments on, the implications of these changes as well as outlining a number of ways in which they might work in practice. The paper will be sent to the key opinion formers within the legal community including the professions and the judiciary and will be published on the DCA's website at www.dca.gov.uk/. Responses are requested by 6 August.
	The Bill itself will also be simultaneously examined by the Constitutional Affairs Committee as part of the pre-legislative scrutiny procedure and interested parties will have an opportunity to comment as part of that process.

Armed Forces' Pay Review Body: Medical and Dental Officers

Lord Bach: My right honourable friend the Secretary of State for Defence (Mr Geoffrey Hoon) has made the following Written Ministerial Statement.
	The supplement to the 2004 Report of the Armed Forces' Pay Review Body making recommendations on the pay of service medical and dental officers has been published today. Copies of the supplement are available in the Vote Office and the Library of the House.
	The review body recommends an increase of 3.225 per cent for all regular and reserve Defence Medical Services medical and dental officers. The review body also recommends a pay increase of 3.225 per cent for medical and dental cadets and an out-of-hours supplementary payment of £4,500 to junior doctors. In addition, the review body recommends that there should be an increase of 3.225 per cent in the values of trainer pay and distinction awards.
	The cost of these recommendations to the defence budget will be some £6.3 million. This will be met within existing departmental expenditure limits.
	The review body's final recommendations are to be accepted in full, with implementation effective from 1 April 2004.

HM Customs and Excise: Spring Report

Lord McIntosh of Haringey: My honourable friend the Economic Secretary to the Treasury has today made the following written Ministerial Statement.
	The Chief Secretary and I have today presented to Parliament this year's spring departmental report for HM Customs and Excise (Cm 6224).
	The spring report provides an interim update on Customs' activities and sets out the department's priorities and expenditure plans for the coming year. This year it confirms strong growth in VAT receipts, which are more than £2.5 billion ahead of the Budget 2003 forecast—including an estimated £1 billion from our crackdown on "Missing Trader" VAT fraud. It reports continued success in tackling tobacco smuggling, and over £30 million of criminal assets seized. The spring report also outlines the major changes facing the department following the announcement of plans to create a Serious Organised Crime Agency and a single revenue department—Her Majesty's Revenue and Customs.
	Alongside this update, the spring report marks a change in policy in relation to the publication of statistics of Customs' seizures. I have decided that Customs will include in its annual and spring reports summary seizure data in relation to those prohibitions and restrictions that it enforces at the frontier but which are not already included in the reports as part of updates on PSA priorities. Customs has not published this information in its annual reports since reporting was streamlined after 1999, but will do so in each spring and annual report from now on.
	There has been continuing interest in the number of seizures Customs makes in the areas where it protects society, including particular interest in Customs' new anti-smuggling role on imported meat and other products of animal origin. Customs will therefore publish seizure information on:
	meat and other products of animal origin;
	articles seized under the Convention on the International Trade in Endangered Species (CITES);
	plants and plant-based goods;
	pornography and paedophilia;
	firearms, offensive weapons and explosives;
	and various other prohibited and restricted goods.
	The data published in this report shows that, in the nine months from April to December 2003, Customs made 9,571 seizures of illegal meat and other animal products with a total weight in excess of 119 tonnes. In comparison, there were 2,053 seizures by all agencies involved in these controls in 2001-02, a figure that increased to 7,819 in 2002-03.
	Customs will continue to consider requests for further information in accordance with the Code of Practice on Access to Government Information. It will only withhold information under exemption 4 (Law enforcement and legal proceedings) or exemption 7 (Effective management and operations of public service) of that code where information would be of value to those who seek to circumvent Customs controls or in the clearest cases of risk to the effective management of its operations.

Voluntary Code of Practice for Retention of Communications Data

Baroness Scotland of Asthal: The voluntary code of practice for retention of communications data under Part II of the Anti-terrorism, Crime and Security Act 2001 came into force on 5 December 2003, pursuant to the Retention of Communications Data (Code of Practice) Order 2003 (SI 2003/No. 3175). Paragraph 33 of the code requires that its effectiveness would be assessed, against criteria identified in the code, three months from the date it received parliamentary approval. The review period, which began on 5 March 2004, will assess the code against the criteria:
	has it improved investigative work;
	how many requests for data have been made;
	is the voluntary scheme working;
	what percentage of the market is covered by communication service providers who have adopted the code of practice;
	are sectors of the industry, which have not adopted the code, enjoying an unfair commercial advantage?
	The voluntary scheme is working in the sense that there are a number of communications service providers that have volunteered, or are volunteering, to retain communications data in line with the code. However most of these volunteers need to prepare themselves, in technical terms, to be able to do so. Consequently it is still premature to evaluate whether investigative work has been facilitated by the voluntary retention of communications data in line with the code or to determine what data has been acquired by investigators that was available only because of its voluntary retention in line with the code.
	Although communications service providers are volunteering to retain data in order to support the important task of safeguarding of national security, service providers are sensitive to any commercial impact from being identified as volunteers. The Government shall not be identifying providers that have volunteered or are indicating a likelihood of volunteering. Equally there are no indications that sectors of the industry, which have not adopted the code of practice, are enjoying an unfair commercial advantage.
	We do not believe, at this time, that identifying the volunteers' precise share of the communications service market is helpful, since it could enable deductions to be made, accurately or inaccurately, about which providers have volunteered. However the Government are confident that a significant proportion of communications data is being retained in line with the code.
	Once the volunteers are able to indicate that they are retaining data in line with the code, it will be possible to conduct a more thorough evaluation of the effectiveness of the code.
	The Government are keeping the issue of retention of communications data under review in the context of the recommendations of Lord Newton's committee, which reviewed the Anti-terrorism, Crime and Security Act 2001, and the declaration of European Council on 25 March 2004 that proposals for establishing rules on the retention of communications traffic data be examined by the Council with a view to their adoption by June 2005.
	In the mean time, the voluntary code of practice remains in place and the Government are continuing to engage with service providers which are considering whether to volunteer.

Fraud Law Reform

Baroness Scotland of Asthal: It is estimated that fraud currently costs the UK economy £14 billion a year. To equip law enforcement agencies to tackle the threat we face from fraud, the existing law needs to be modernised. The main problem is that the existing statutes focus on very specific types of fraudulent behaviour, so they do not effectively cover all the potential varieties of fraud and cannot keep pace with rapidly developing technology.
	The Government are today publishing a consultation paper on fraud law reform. Its proposals are based on those made by the Law Commission in 2002, following a reference made to them in 1998 by the then Home Secretary. In particular he asked the Law Commission to consider whether a general offence of fraud would improve the criminal law. The commission concluded that it would help to make the law simpler and more easily understandable for juries, defendants and the general public and make the prosecution process more efficient and effective.
	The central proposal is that there should be a general offence of fraud which can be committed in three different ways: by false representation, by wrongfully failing to disclose information or by abuse of position. In each case the behaviour must be dishonest, and must intend to make a gain for the defendant or cause a loss to another. However the gain does not actually have to be obtained, as it does under the existing statutory offences.
	We also propose a new offence of "obtaining services dishonestly", to close a current loophole regarding fraudulent use of machines. The current offence of obtaining services by deception does not cover, for example, giving false details to access data from the internet for which a charge is made. This is because a machine has no mind and so cannot be "deceived".
	The consultation paper also seeks views on whether all behaviour which is currently prosecuted as conspiracy to defraud can be prosecuted under the proposed new law of fraud (or under other existing law) so that the common law offence of conspiracy to defraud can be repealed. It also seeks views on the possible extension of the existing offence of fraudulent trading, and on the creation of a new offence of possessing equipment to commit fraud. The proposals will cover England, Wales and Northern Ireland.
	This legislative reform is only part of a wider set of current initiatives which will help tackle fraud. For their part the Government have:
	set up the Assets Recovery Agency and implemented the Proceeds of Crime Act 2002. These will take the profit out of crime by increasing powers to find and recover money from those who benefit from and launder the proceeds of frauds and other crimes;
	agreed extra resources for the Serious Fraud Office and City of London Police to tackle fraud;
	included new procedures to deal with multiple offending in the current Domestic Violence, Crime and Victims Bill;
	included proposals to ensure effective incentives for criminals who give evidence against their associates, which will help in fraud cases, in the White Paper One Step Ahead, published on 29 March 2004;
	proposed new methods of tackling identity fraud in the White Paper on Legislation on Identity Cards, published on 26 April 2004. The introduction of identity cards incorporating biometrics (such as finger or iris scans) will help people to identify themselves uniquely and protect their identity against fraud.
	Combating fraud requires vigilance from all and we very much welcome the measures that financial institutions and the retail industry have taken to protect credit cards by a chip-and-PIN system. That step has been found to cut card fraud dramatically in other countries.

Iraq: Export Licence Applications

Baroness Symons of Vernham Dean: Following consultation with the Foreign and Commonwealth Office and the Ministry of Defence, the Department of Trade and Industry recently approved a further licence to export military list goods to Iraq. The arms embargo against Iraq remains in place under United Nations Security Council resolution 1483 (2003), with the exception of "arms and other related material required by the (Coalition Provisional) Authority to serve the purposes of this and other related resolutions". As this includes promoting the development of free and fair media, Her Majesty's Government consider it appropriate to grant exemptions for the export of armoured vehicles for use by media organisations working in Iraq. Her Majesty's Government have included conditions for these licences, including a limit to the quantities. The export is consistent with the Consolidated EU and National Arms Export Licensing Criteria. Future applications will continue to be assessed on a case-by-case basis against the UN Embargo and Consolidated Criteria, taking into account the circumstances prevailing at the time.

EU Presidency 2005: European Council Dates

Baroness Symons of Vernham Dean: The United Kingdom will hold the Presidency of the European Union from 1 July until 31 December 2005. During that period my right honourable friend the Prime Minister will chair two meetings of the European Council: on 27-28 October 2005 and 15-16 December 2005. Both meetings will take place in Brussels.

NHS: Overseas Visitors' Eligibility for Free Primary Medical Services

Lord Warner: My right honourable friend (Mr Hutton) made the following Written Ministerial Statement on 14 May.
	We are publishing today a consultation paper on proposals to revise and clarity the rules on eligibility for free National Health Service primary medical services. Copies have been placed in the Library.
	The consultation paper sets out proposals to strengthen the current system so that eligibility for primary medical services would be aligned as closely as possible with that for free hospital care. It sets out proposals for introducing a system of charges for those overseas visitors who would not be eligible for free treatment and seeks views on how such charges should operate.
	Under the proposals overseas visitors would continue to be entitled to receive emergency or immediately necessary treatment free of charge. The paper also invites views on whether any other treatments should continue to be free for the protection of public health.
	The proposed new rules are intended to allow general practice staff and primary care trusts to distinguish more easily between those eligible for free treatment and those not.
	The consultation begins today and runs until 13 August 2004.